Barbara Ehrenreich comments on working in America

August 20, 2007

Smashing Capitalism

Somewhere in the Hamptons a high-roller is cursing his cleaning lady and shaking his fists at the lawn guys. The American poor, who are usually tactful enough to remain invisible to the multi-millionaire class, suddenly leaped onto the scene and started smashing the global financial system. Incredibly enough, this may be the first case in history in which the downtrodden manage to bring down an unfair economic system without going to the trouble of a revolution.

First they stopped paying their mortgages, a move in which they were joined by many financially stretched middle class folks, though the poor definitely led the way. All right, these were trick mortgages, many of them designed to be unaffordable within two years of signing the contract. There were “NINJA” loans, for example, awarded to people with “no income, no job or assets.” Conservative columnist Niall Fergusen laments the low levels of “economic literacy” that allowed people to be exploited by sub-prime loans. Why didn’t these low-income folks get lawyers to go over the fine print? And don’t they have personal financial advisors anyway?

Then, in a diabolically clever move, the poor – a category which now roughly coincides with the working class – stopped shopping. Both Wal-Mart and Home Depot announced disappointing second quarter performances, plunging the market into another Arctic-style meltdown. H. Lee Scott, CEO of the low-wage Wal-Mart empire, admitted with admirable sensitivity, that “it’s no secret that many customers are running out of money at the end of the month.”

I wish I could report that the current attack on capitalism represents a deliberate strategy on the part of the poor, that there have been secret meetings in break rooms and parking lots around the country, where cell leaders issued instructions like, “You, Vinny – don’t make any mortgage payment this month. And Caroline, forget that back-to-school shopping, OK?” But all the evidence suggests that the current crisis is something the high-rollers brought down on themselves.

When, for example, the largest private employer in America, which is Wal-Mart, starts experiencing a shortage of customers, it needs to take a long, hard look in the mirror. About a century ago, Henry Ford realized that his company would only prosper if his own workers earned enough to buy Fords. Wal-Mart, on the other hand, never seemed to figure out that its cruelly low wages would eventually curtail its own growth, even at the company’s famously discounted prices.

The sad truth is that people earning Wal-Mart-level wages tend to favor the fashions available at the Salvation Army. Nor do they have much use for Wal-Mart’s other departments, such as Electronics, Lawn and Garden, and Pharmacy.

It gets worse though. While with one hand the high-rollers, H. Lee Scott among them, squeezed the American worker’s wages, the other hand was reaching out with the tempting offer of credit. In fact, easy credit became the American substitute for decent wages. Once you worked for your money, but now you were supposed to pay for it. Once you could count on earning enough to save for a home. Now you’ll never earn that much, but, as the lenders were saying – heh, heh—do we have a mortgage for you!

Pay day loans, rent-to-buy furniture and exorbitant credit card interest rates for the poor were just the beginning. In its May 21st cover story on “The Poverty Business,” Business Week documented the stampede, in the just the last few years, to lend money to the people who could least afford to pay the interest: Buy your dream home! Refinance your house! Take on a car loan even if your credit rating sucks! Financiamos a Todos! Somehow, no one bothered to figure out where the poor were going to get the money to pay for all the money they were being offered.

Personally, I prefer my revolutions to be a little more pro-active. There should be marches and rallies, banners and sit-ins, possibly a nice color theme like red or orange. Certainly, there should be a vision of what you intend to replace the bad old system with—European-style social democracy, Latin American-style socialism, or how about just American capitalism with some regulation thrown in?

Global capitalism will survive the current credit crisis; already, the government has rushed in to soothe the feverish markets. But in the long term, a system that depends on extracting every last cent from the poor cannot hope for a healthy prognosis. Who would have thought that foreclosures in Stockton and Cleveland would roil the markets of London and Shanghai? The poor have risen up and spoken; only it sounds less like a shout of protest than a low, strangled, cry of pain.

183 Comments

"Why didn’t these low-income folks get lawyers to go over the fine print? And don’t they have personal financial advisors anyway?"

Come to think of it, why hadn't those people the bridge collapsed under in Minneapolis had their private road engineering consultants go over their commuting route? Or those miners (and the dead rescuers) have their own mine safety experts thoroughly inspect that mine in Utah?

Not only that, but those unappreciative people in other countries no longer show the proper respect for America's superpowerhood:

"Pay day loans, rent-to-buy furniture and exorbitant credit card interest rates for the poor were just the beginning".

Isn't this the truth. Just watching those ads for Payday loans make me wanna heave. And it will get worse, as many of these sub prime and NINJA loans will mean sub average prices at auction.
Barbara,thanks for pointing out it's not a crime to be "poor" or make minimal wages.

I think it is time we show some compassion here.Our society needs an overhaul and the greed we have had for the past 50 years has worn us all out.Maybe it might become cool to not oppress the poor. Sounds good to me.

You can't have it both ways that is an old saying and a ever true one. Why are today's greedheads too pig ignorant to figure this out? People making livng wages tend to be the ones most likely to buy things. The poorly paid pile up debt, get in line for rent subsidies and food stamps. Well I guess bankruptcy lawyers have job security in this wonderful new economy.

are we certain that dispatching capitalism would allow retail workers to earn higher wages and would prevent working class folk from being frauded at the mortgage company and title loan office. which model of socialism do we examine to find this miracle. surely that solution to class division, acrimony and asperity is not this simple. otherwise the german democratic republic would have survived and would have become the egalitarian european utopia as advertised.

"While with one hand the high-rollers, H. Lee Scott among them, squeezed the American worker’s wages, the other hand was reaching out with the tempting offer of credit. In fact, easy credit became the American substitute for decent wages."

It's so true it's almost poetry. I have never understood why the CEOs despise the very people that work to make them rich.

The socialist model did not work because it was applied in poor countries. In some cases, such as in Romania, things got so bad that there was virtually no food. But since the American economy has some fat cats who have lots of money, it could certainly afford some like the leaders of the former Communist regimes, who earned or stole less than the rich American businessmen. The resources to feed the population and keep it content exist in the rich capitalist countries, so if only a socialist or communist regime came to power, the serious economic problems that lead to the demise of most Communist regimes would not be an issue.

I can see other problems at the beginning, such as the fact that the current ruling classes and their equals in other countries would not like the new regime. On the other hand, the class system that exists in the States is largely based on people's actual situation rather than on a sense of class superiority that existed in some Communist countries despite their egalitarian ideology. Some people there seemed to think that being educated professionals made them the modern equivalent of nobility, or something like that.

Some typically American traits such as being selfish and caring less about one's family, as well as the American work ethics and professionalism, would facilitate the dismantling of the old structure. Close-knit families, bribery and doing a bad job made life more bearable in those countries. And despite its best efforts, the State simply did not have the technology to spy on people the way it is done nowadays in America. Ceausescu would have cameras in all the stores and apartment buildings. With the technology, the work ethics and their lack of concern for others, Americans working for the new regime would be able to control the society more matter-of-factly, with less cruelty but more efficiently (like in the military or in a large bureaucratic institution), and with fewer opportunities for human alliances against the system.

As for mortgage under socialism, the State would control it and establish prices, of course.

There are rich and poor in socialist countries as well, however, the rich and middle class understand that they can become poor at any time and therefore support a social safety net. Unlike here, when tragedy strikes it is your own damn fault. You are supposed to draw on family and friends during hard times, but frequently they can't help or don't want to, because they don't want to become impoverished themselves by supporting another person(s).

I think we need to ask this question "If the capitalism does is not good for most people, how come all these people try to come here ?" People vote with their feet and the vote is overwhelming.
As a person who spent first 19 years in ex Sviet Union while it was still a socialist country , I REALLY appreciate capitalism and while it is not perfect , it is the best around here.

People who "vote with their feet" by immigrating don't really know the real situation and are attracted by the affluence they hear about and compare that to the poverty, or even relative poverty, they see at home. They don't realize that many people are simply excluded from the American dream. But if things are really bad where they come from, that's because the country is poor, not because capitalism is good. A communist regime would do great in a rich country where people do not have to wait in line for hours at the store to get a package of chicken legs and heads or to wake up at 5 AM if they want to find milk and yogurt. And as some say here, the workplace is not a democracy. Well, in socialist countries, it is, or it was.

I have always wondered where the customers for the products that we have outsourced to slave labor countries were supposed to come from. If Americans can't earn good money, the day will come when even easy credit will not work.

I believe there has already been a lot of government intervention in the form of credit inflation in the last several years. Since the inflation doesn't apply to the price of labor and the things that labor produces (e.g. manufactured goods), when the poor encounter this system, as in the case of buying and selling real estate, they can't deal with it effectively -- they don't have the money (real or credit-generated). I would guess that some kind of breakdown is not far off, but I'm not sure when and where it will occur. We know in the case of the stock markets that the government will simply create as much (credit) money as necessary to keep prices inflated, so we will not see a 1929-style crash again.

I had a deep sense of foreboding last summer when I saw those signs in storefronts: "No assets, no income? No problem!"

What has our world come to?

I am of the opinion that the working poor, w/out access to easy credit, serve as somewhat of a "grounding force" in our society's obsessive materialism. Yes I realize this is an overly romantic view. But I'm talking about a family like mine (main breadwinner works in retail): we do have health insurance, but for many years, had one car, a small apartment, discount or salvation army clothes only, cheapo pop-up strollers for tots, etc, etc. ... and relying heavily on libraries for entertainment. In short, we prided ourselves somewhat on getting by w/what we could afford. We did have credit cards and occasionally ran up balances we needed to devote our entire tax refunds to pay down, but we lived much simpler lives than what most people would call "middle class." We were also at least as happy as we are now w/a lot more trappings of middle class life ... but money wasn't a constant, crushing pressure on us. The big diff? We did own our own home ... but it was a small condominium, not a single-fam home.

What do we lose when such families are coaxed into the suburbs, into mortgages they'll never be able to afford if the wage-earners are struck w/any illness more serious than bronchitis (esp. if health insurance is inadequate ... btw, ours is now despite higher premiums)?

I think we lose a visible reminder of concepts like "starter homes" or even (gasp!) apartment living ... we lose the fantasy that we can all live like the people on tv. In fact I blame tv more than anything else for this predicament ... sorry to sound paranoid, but I think it's about two clicks above evil. And I probably only think that b'c to save money all those years ago, we got rid of tv and never signed on again.

i see regulation as a leavening agent to capitalism however i do not see socialism as an effective nor desirable alternative. we do not want the state to own the major production industries. safety would not improve. production would not increase. income would not be redistributed. we need to find the path which harnesses the driving force of capitalism and yet preserves the dignity and security of the working class. socialism has failed the experiment time and again. the german democratic republic was a wealthy european country prior to its annexation by the russians and later by the soviets.

It was said:
"I think we need to ask this question "If the capitalism is not good for most people, how come all these people try to come here ?" People vote with their feet and the vote is overwhelming. As a person who spent first 19 years in ex Sviet Union while it was still a socialist country , I REALLY appreciate capitalism and while it is not perfect , it is the best around here."

"While it is not perfect , it is the best around here."
There it is! Thats what's wrong with the world. Just because something's the best does not mean it can't be better. It's said alot with the justice system. "It's the best system in the world!" As innocent people are arrested, imprisoned, and even executed for crimes they did NOT commit. Okay yah, the way of life in the U.S. is the best. But it's not the best that it can be! Are Americans really content with a marriage built on a foundation of "good enough?"

Just because Barbara did not list an exact time and date, along with names and location does not mean it dose not happen Chris. In fact it happens every day. If you don't see it it's because you choose not to see it.

"In fact I blame tv more than anything else for this predicament ... sorry to sound paranoid, but I think it's about two clicks above evil."

TV. The New Prometheus. Ha ha.

TV. According to you, the airwaves regulated by the government are the agent of our destruction.

Therefore, you think our government is the enemy of the people. To remedy this, you seem to be suggesting vast restrictions on the use of the airwaves. Much like those freedom-loving countries in the middle east and every dictatorship throughout history. Nice.

justin, the first hand accounts that i read written by folks who have lived in the soviet union depict a society which is woefully inadequate to secure stability for the population. and this in a european country. there are accounts of waiting years to receive an apartment. and years more for a refrigerator. the apartment you have waited for for years is poorly constructed and poorly maintained. the quality of food for the masses is inadequate and there is rationing. those with political connections and foreigners fare much better as they have hard currency. it is quite common for the crops to rot in fields while the population in the cities are starving. this is because there is no incentive for the population to harvest the crops. there is no profit incentive. yes extractive capitalism has it many faults. on the otherhand we are quite living well by comparison and to ask the government to deliver the best of the best to a population of 300 million people is a fairly tall order.

Yes let's just all decide right now that we're not going to engage chris. I will tell you now the essence of what he'll say: everything is great, there are no problems, anyone who goes broke has only themselves to blame, our health-care-delivery system is the envy of the rest of the world, and again, anything that happens to anyone is by their merits or faults alone and bully for them.

Since we all know that sums up his sensibilities and we're all here to explore the nuances of the situation and move away from a "victim and victimizer" mentality in our discussion ... let's just leave him out of it. I'm sure he'll cut and paste several sections of these comments and goad me into responding but I won't do it.

"Then, in a diabolically clever move, the poor – a category which now roughly coincides with the working class – stopped shopping."

Yeah. Sure. No food for the kids. No gas in the car. Not a dime for anything. Yeah. That's close.

She obfuscates:

"Both Wal-Mart and Home Depot announced disappointing second quarter performances, plunging the market into another Arctic-style meltdown."

Yeah, Wal-Mart and Home Depot earned less in the second quarter. Guess what? Target and Lowes earned more. Target and Lowes took some business from WalMart and Home Depot. I guess that means consumers are smart enough to shop where they find the best values.

"Conservative columnist Niall Fergusen laments the low levels of “economic literacy” that allowed people to be exploited by sub-prime loans. Why didn’t these low-income folks get lawyers to go over the fine print? And don’t they have personal financial advisors anyway?"

In other words, the sarcastic irony of the preceding is not driven by the fact that the "poor" have little money. It is driven by the notion that to be poor is to be stupid.

In Barb's view, the "poor" saps are actually stupid dupes who are too dumb to know anything about anything and must rely on a paternalistic government to save them from their own stupidity.

Barb has such a touching way of insulting the people she purports to champion.

By the way, who buys her books? In the poor sections of New York City there are no Barnes & Nobles. Bookstores are almost non-existent in many black and hispanic neighborhoods.

However, the best prices on used books are found in thrift stores -- Good Will, Salvation Army and other local thrift operations.

Paperbacks are often 50 cents. Hardcover books are usually a dollar. But the selection is limited and I don't believe I've ever seen any of her titles on thrift store shelves.

I do not find communism, as practiced in the former USSR and countries such as China and Cuba, to be an ideal solution to the "extractive capitalism" problem. As roger clearly pointed out, people need an incentive to work, and the abstract concept of "the common good" is not enough for most people, even me, to work their tails off day after day. Money, private property, and private ownership are fantastic!

What I dislike is when people take arch-advantage of the capitalist system through such phenomena as payday loans and exorbitant credit card interest rates in order to try and satisfy their desire for profit. There's a definite difference between true capitalism and just plain greed. Ford had the wisdom and the foresight to make sure his employees could afford to buy Fords. Nowadays, some people (though I believe not most) who work at big-box stores can't afford to buy big-box store items. Strange, this is, and counterintuitive.

I'm proud to say that I'm an Orwellian. Orwell hated that both the communists and the capitalists were playing the old "both sides against the middle" game. In my opinion, most of us in America ARE the middle, and we need to watch out for greed and exploitation on both sides of the proverbial coin.

It is seldom advisable to tell all. Be sparing, for instance, in the use of adverbs after "he said," "she replied," and the like: "he said consolingly"; "she replied grumblingly." Let the conversation itself disclose the speaker's manner or condition. Dialogue heavily weighted with adverbs after the attributive verb is cluttery and annoying. Inexperienced writers not only overwork their adverbs but load their attributives with explanatory verbs: "he consoled," "she congratulated." They do this, apparently, in the belief that the word said is always in need of support, or because they have been told to do it by experts in the art of bad writing.

"animal farm and 1984 were interesting stuff. the jungle by sinclair also reads along these lines."

And it's interesting that so many readers of this blog believe the massively failed socialist states represent the best possible future for America.

That's real thinking at work. These brainiacs want to replace a functioning system with a system guaranteed to fail. Yikes. Maybe stupidity is a spreading disease.

Meanwhile, The Jungle by Upton Sinclair only works for people who have no idea about the direction in which capitalism had already taken the country by the time Upton got around to writing about the slaughter-houses.

You wrote:

"the question is how to deliver genuine social justice."

There is one point of which you can be sure. The country will never agree on the best path to "genuine social justice."

However, there is no doubt that more capitalism delivers more prosperity to more and more people.

sinclair speaks to the question of how much responsibility we may authentically lay at the feet of employers for the safekeeping and benefits of its own employees. this question leads to social justice. can we expect employers, and i might add that many employers are small businesses less than 50 employees, to deliver all of the entitlements which those who advocate for social justice demand/require/anticipate. this is not a simple balance.

I think a dose of socialism may be good for your country.How large a dose you can handle, well that's up to you.

Ontario, Canada elected an NDP government in 1992 or thereabouts. It took the constituents about 3 years to figure out that this wasn't their cup of tea and quietly elected a Conservative government in the next election. This was just enought to tantalize the people into seeing the benefits of a "socialist" government but not strong enough keep them around.

During this time, reforms were introduced by the NDP that are still favoured by the people and this couldn't have happened if the NDP were shut out as they historically have been.

My point is that you need to look at other's methods and policies and see what is and is not working.

I don't think you will ever see another NDP government in Ontario ever again, but they did show us some positive things that benefitted everyone.

I'm not sure why we had to give the robber baron days another go, but we seem to like to repeat these things from time to time.

But in the long term, a system that depends on extracting every last cent from the poor cannot hope for a healthy prognosis.

Depends on whether the economy needs the poor as consumers, really. The luxury sector is doing just dandy. While we're very fond of the "riches to rags" cases in the Depression, the really rich did just fine, for the most part, and had access to all the cheap labor they could possibly want.

Can they manage to build an economy that successfully uses subsistence-wage labor to continually grow the wealth of the rich? Hey, it's been done before around the world, and it almost seems like the goal sometimes.

Tysyacha - Orwell was a socialist, not somebody in the political "middle". He was anti-totalitarian and anti-Soviet, but he was pro democratic-socialism and had sympathies for anarcho-syndicalists. I'll find a link if you'd like, but it's pretty easy to google.

"Tysyacha - Orwell was a socialist, not somebody in the political "middle". He was anti-totalitarian and anti-Soviet, but he was pro democratic-socialism..."

I consider myself a democratic socialist, then.

However, I do NOT support any atrocities such as the Ukrainian Famine/Holodomor. Orwell satirized this type of what I call "passive genocide" in his Ministry of Plenty, which concerned itself with Starvation.

Yes, I have put myself into a category using the evil "S" word, and I know it. Call me every Communist insult in the book if you want (pinko, etc.), and I won't call you wrong. Go ahead. The thing is, I see people around me who struggle and save every day, trying to have some influence over the government policies they have to follow by law, but the moment they stumble, they fall and may not get up. I don't like this.

More capitalism for more people IS good, but neither capitalism nor socialism is a perfect system. I fear that our mixed economy here in the U.S. is becoming more "un-mixed" every day.

If I'm supposed to "get while the getting's good" and get rich, how do I do that? Moving up the corporate ladder ain't what it used to be--not with outsourcing and all the people who have powerful business or social connections.

I imagine the best system for production would be composed mainly of cooperatives, rather than traditional authoritarian corporations. I don't see a lot of difference between subordinating oneself to the rich and subordinating oneself to the government, except in the recent past it's been easier to get off the leash, if only temporarily, in the former case.

Chris, I have seen one of Barbara's books at my local Goodwill in northern Maryland. It was "For Her Own Good", and in hardback, about a month ago. I try to wait for a promotion on used books, like $5 a bag.

Thats true. I have read Nickel and Dimed about 10 times and I have no intention of selling it or giving it away. I have even bought some for people that I thought should read it but could not afford it. They to have read it more then once and cherish it as if it where gold.

slithy, do some reading about the economic disaster and human rights butchery in north korea and when you get a few more facts then get back with me. i have no idea what you could possibly mean by culture needing to be a little more social. no a little more socialsm is not in order.

There are many layers and many parties to any dynamic ... micro and macro decisions and systems. There's no point proposing a one-size-fits-all political/economic system ... but it does make sense to think about tweaking American-style capitalism, if for no reason other than it appears to be on the verge of imploding otherwise. Unless it was my imagination that the fed has been injecting huge sums of money into the markets to keep it from utter crisis mode. Just like Frances Fox Piven in "Regulating the Poor" argues ... in times like this, we will see all kinds of assistance (rent subsidies for all these foreclosed-upon mortgage holders, for example) quietly made available ... then when the economy improves and unemployment is low and the housing mkt has stabilized, public rhetoric and sentiment will turn against the less-fortunate once again.

Funny, isn't it, that all of us middle-class folks w/our 401K's are in need of help from the fed to help keep our retirements solvent ... but that's somehow different than giving handouts to other people whose fates are at the whim of labor and other markets. Kind of reminds me of all the now-middle-class people I know who've spent brief periods on welfare ... they all claim they were different than all the other welfare recipients out there. Funny how some types of gov't assistance are acceptable. Hey, I'm not here to bite the hand that feeds us, but it IS gov't assistance and I doubt we'll see people like Roger arguing that all of us who weren't smart enough to divest from mtg-based mutual funds should suffer for a bunch of over-extended borrowers and lenders.

i would respond by saying that much more was apparently saved than just the 401ks of middle class folk when the money was injected into the market. i would like to think that millions of jobs were saved as well by the govt stabilizing the market. i dont know what this sudden investment in the market means. i am not convinced that the system is about to implode. as for welfare i see direct financial assistance to poor folks (financial assistance, food stamps, child care, and medicaid) which is the field i work in now in similiar hue as i see farm subsidies (often to large agricultural corporations), many tax breaks for corporations and government bailouts (chrysler for example). each seems to foster undue dependence on govt assistance which in the long run i believe to be unhealthy. this is not to say that we should eliminate assistance. there should be reform at all levels of government for the purpose of weaning common folk and corporations away from unnecessary public assistnce. stabalizing the market appears to be a different dynamic. no i dont think that middle class folk should suffer at the hands of fools who have overextending their credit at the market any more than i think that generations of women and their daughters should be allowed to get trapped in generational dependence. i believe that failure to reform at all levels will lead to socialism and consequent economic failure.

"Global capitalism will survive the current credit crisis; already, the government has rushed in to soothe the feverish markets."

The Fed cutting the shortest-term interest rates is not a drastic measure. If the Treasury buys back its bonds and injects cash into the money supply, well, that's good management.

Meanwhile, here's the facts: The crisis is over. The next step is exploiting the current turmoil for profit. Warren Buffett might be the guy to do it. Bear Stearns may jump in too. Wall Street being what it is, one brokerage house will follow the next. Soon, all of them will crow about recouping much of what was lost over the last couple of months. End of story.

Barb entertains:

"But in the long term, a system that depends on extracting every last cent from the poor cannot hope for a healthy prognosis."

While this statement may contain some truth, it does not reflect economic reality in the US. It applies to North Korea and Cuba, however -- two countries Barb seems to admire.

She crows:

"Who would have thought that foreclosures in Stockton and Cleveland would roil the markets of London and Shanghai?"

"The poor have risen up and spoken; only it sounds less like a shout of protest than a low, strangled, cry of pain."

Gee. The US is enduring a year of above-average mortgage defaults. There's a sudden pain and sympathy extended to those who found themselves in mortgage trouble this year. But based on the swiftly climbing volume of the outcry, no one cared about the people who defaulted last year, or the year before last.

Why the sudden concern for an event that is a component of capitalism? Is this the first anyone has heard of default? Seems that way.

"I have read Nickel and Dimed about 10 times and I have no intention of selling it or giving it away."

Did reading and re-reading the book improve your life in any way? Did it help you financially? Or did reading it allow you to find a scapegoat for the financial inequities you believe you have suffered?

Chris:
Cognitive dissonance is really just willful ignorance. There is much more to the world than capitalistic greed as practiced in the US and the failed state capitalism of Soviet communism. Take a break and look at European socialism, particularly Scandinavia.
Anarcisse may have a better way than any of those mentioned here.
Cheers, Stargeezer

You said:
"Did reading and re-reading the book improve your life in any way?"

Yes Chris it did. Because of her book I learned about unions and sought out a union job. The difference between a union job and a none union job is like two different worlds. And as you might remember from one of Barbara's blog's "Big Box Brother" I too was arrested for crimes I did not commit. I fell in to a dark and lonely pit. (Figuratively speaking.) How ever, after reading her book I climbed out and now I'm helping others search for a better life.

you said:
"Or did reading it allow you to find a scapegoat for the financial inequities you believe you have suffered?"
In a blog about 5 months past I said "Wal-Marts employes are starving, home less, and other wise financially dead."

To this you said something like "so now your blaming the financial difficulties of some people on the employers?"
I have news for you. It's not just some people. It's all of wal-marts, Targets, K-marts employees. ALL OF THEM! That alone should tell you that somethings wrong

Mortgage Lenders used to look at mortgage applicants and tell them, for their own good, "I'm so sorry. I can't approve this loan. You haven't got enough savings or income or credit history. Why don't you put yourself on a budget for a year or two and then come back to me. We'll be able to do something for you then." The lenders did this because they had to; the people who had the money didn't want to risk it on people whose ability to repay debt hadn't been established.

Then the rules relaxed. This benefitted people like me, teachers who didn't have the most outstanding income but who proved that they knew how to pay back money bit by bit. People like my husband benefitted, people who didn't have credit history but who proved that they brought home a decent paycheck. The thing is, it went too far for reasons that had nothing to do with how lenders felt about people and their wish for a new home. Through some shifty sales of mortgages, the original lenders got their money and the banks who got stuck holding the notes are out of luck.

It isn't Capitalism that needs to change, for that is just a concept. It isn't Socialism that is the answer, for that is another concept. It is the way concepts are played out in the real world where people have to live. Advocating a free market is fine, as long as those who participate play by rules of honesty, fairness, and real results. Spurious accounting will yield short term gains but ultimately bring down empires. Socialism is a good idea as long as no one abuses the rights accorded to citizens. No preferential treatment other than for those in real need can be tolerated.

In other words, people need to believe that they are accountable for their dealings whether those dealings be in a Capitalist or Socialist method. I'm not going to stand on one leg or hold my breath until that happens, however. That could get uncomfortable.

"There is much more to the world than capitalistic greed as practiced in the US and the failed state capitalism of Soviet communism."

The undertones, overtones, subtexts and subjects of this blog reflect the irrational notion that socialism is the answer to whatever ails life in the US. If you want to tackle other subjects, that's okay with me, but almost all of my comments address the core concerns raised by Ehrenreich and other posters.

You wrote:

"Take a break and look at European socialism, particularly Scandinavia."

Okay. Take a look. First, you have a handful of countries with populations of less than 10 million. I live in New York City, where the population is almost 8.5 million. Meanwhile the population of the US is 300 million. Looking only at the population, you must concede that a government serving 300 million consitituents has a vastly more difficult struggle than the government of Sweden, which serves about as many people as the government of New York City. Big difference.

Second, the populations of the Scandinvavian countries are homogeneous by most measures. The sameness vastly reduces government's headaches.

Third, Norway, for instance, has channeled its oil revenue toward the betterment of the country. Norway has had the good sense to exploit is oil resources to a far greater extent than the US. The citizens of Norway enjoy the benefits of collecting the cash from selling substantial quantities of oil into the world market.

That contrasts with the US, where knuckleheads try their hardest to stop oil companies from bringing as much oil as possible to the marketplace. Thus, by restricting the exploitation of our own resources, we cause international prices to rise. That, in turn, allows Norway to receive top-dollar for the oil it exports. Therefore, the US contributes to the higher oil prices that propel the proserity of Norway. Nice deal for Norway. Bad deal for the US.

Scandinavian culture values education. While the US maintains the best colleges and universities in the world, Scandinavians, as a group, are better educated in the basics. Why? Because, as I said, that region of the world truly prizes education. But when an entire homgeneous Scandinavian country schools the same number of children as New York City, you can be sure the Scandinavian country will get better results.

On the other hand, all the Scandinavian countries have begun to hit the financial limits of their socialistic practices. The populations are aging and their aggregate medical expenditures are soaring. Hence, they have begun to cut back on services.

All those nations are facing financial calamities because they currently provide more services than their tax rolls can support. The nations will continue on this path for a while longer. Taxes will rise until the populations reject the excessiveness of their generosity. Conservatives will gain political clout. The change will result in cutbacks.

Businesses will relocate to more favorable economic climates. Note that Ford owns Saab, but Ford is now trying to sell it. After the sale, Saab will boot a lot of employees to regain profitability.

I wouldn't count on that. There is a big disparity between the inflated money with which real estate and stocks are valued, and the relatively uninflated money with which labor and goods and services produced by labor are priced. Money is now created by government and private credit and has little or no material basis, and one big question is how much of it there is. If the money supply of a community has expanded well beyond its productive powers, at some point a correction is almost inevitable: either by deflation of the inflated prices, or the inflation of the uninflated prices. The crisis will show up first at crossover points, for instance, relatively poor people trying to buy real estate, where credit has been extended as a kind of trick whose payoff depends on the continued inflation of the market.

We are probably going to see important political pressure to bail out the subprime lenders and their clients (or victims, if you prefer). However, if they're bailed out -- or if real estate continues to inflate in other areas -- some of that money will inevitably enter the labor / consumer realm, inflating prices there. This will make it impossible for the government and banks to pretend there is no inflation, and will force a rise in interest rates, making things difficult for big debtors like the U.S. government and heavily leveraged corporations (to say nothing of small-time speculators and plastic addicts).

For all of those looking for a model.. Only two countries exist on earth with an EXPANDING middle class, and SHRINKING rich and poor classes. Wanna guess? 1)Norway (North Sea Oil), and 2) Canada (Oilsands).
Commodities + Capitalism + Strong Socialist tendancies in Gov't.

Welcome to Canada... Oh - and one more reason - gov't social policies are designed to encourage middle-class existence, not to enable poverty (think public $$ for day care, long maternity leaves, tax breaks on salary, rather than handouts for no income).

"Yes Chris it did. Because of her book I learned about unions and sought out a union job."

Knowledge about unions is found in every bookstore and library and on the internet. Ehrenreich has no unique control of such basic information. Thus, what you claim to have learned from her book could have been gotten from many sources. Furthermore, some basic knowledge of unions should have come from attending school since public school teachers are all union members.

You wrote:

"The difference between a union job and a none union job is like two different worlds."

Yes, I know. I've been attempting to get a passport for my son through the Post Office over the last few days. The union morons at the Post Office have already promised to fail to get us the passport in time for a trip to Jamaica.

Meanwhile, the private expediting company several doors down from the Post Office will have the passport for me TOMORROW.

The situation fascinates me. Both the Post Office and the Expediter must get the document from the State Department. But the Post Office claims the process will take more than a month. The Expediter can get results from the same government agency in 24 hours. Yeah, I know how unions work.

You wrote:

"And as you might remember from one of Barbara's blog's "Big Box Brother" I too was arrested for crimes I did not commit."

That's your belief. But being arrested is not the same as being charged with a crime. I doubt you were charged. Perhaps you were intimidated by unpleasant people. Try acting in a belligerent manner at an airport security checkpoint or gate or other site where security is tight. Then you will experience the mistake of venting your anger and frustration on unionized airport personnel.

You wrote:

"I have news for you. It's not just some people. It's all of wal-marts, Targets, K-marts employees. ALL OF THEM! That alone should tell you that somethings wrong."

I see. Then your solution is to increase the price of everything. You especially want to see an increase in the prices of goods and services aimed at people who are not affluent.

In other words, you believe money grows on trees. I guess believe this because Ehrenreich is your guru on the subject of economics. You'd do well to demand a refund and buy a basic economics book written by Milton Friedman.

"This benefitted people like me, teachers who didn't have the most outstanding income but who proved that they knew how to pay back money bit by bit."

Extending credit is based on assessment of the risk of default by the borrower. Analysis of extensive historical data enables lenders to judge their risk levels. They do their best because there is no profit in losing money.

You wrote:

"The thing is, it went too far for reasons that had nothing to do with how lenders felt about people and their wish for a new home."

Oh. And where should the line have been drawn? If lenders could identify those who would default BEFORE those people were given loans, the number of defaults in the US would be ZERO.

However, the number of defaults has never been ZERO. Why? Because no one can spot the break-point. Lenders understand that they must overshoot by a little bit, rather than undershoot.

You wrote:

"Through some shifty sales of mortgages, the original lenders got their money and the banks who got stuck holding the notes are out of luck."

You are absolutely WRONG. First, if you are alleging that some lenders engaged in illegal lending, that's an entirely different problem than the one that is the affecting US equity and credit markets today.

Second, BANKS have had NO problems with defaulting loans. You do not know how the banking business works and you do not know how the mortgage business works. Or the business of investing in mortgages.

Banks might own mortgage subsidiaries that issued mortgages now in default. Washington Mutual has a mortgage subsidiary. But because the mortgage business is separate from the bank, the bank is exposed to much less risk.

In the case of Washington Mutual, you can be sure earning will drop this year. Big deal. Corporate earnings rise and fall every year. If the stock price of Washington Mutual drops enough, another bank might acquire WM.

In six months you will wonder what all the fuss was about.

Since you think too much credit was extended, tell me how you would judge each applicant to ensure that loans were granted to only people able to repay the debt.

"We are probably going to see important political pressure to bail out the subprime lenders and their clients."

Nonsense. Other than cuts in the Discount Rate and a reduction in the Fed Funds Rate -- which reaches across the entire economy -- there will be no "bailout."

Actually, the term -- bailout -- is ridiculous. Companies, such as Chrysler years ago, are not "bailed out." Chrysler received LOANS from the government when no commercial lender would take the risk of financing Chrsler.

The LOANS were REPAID. Here's the facts. If Chrysler were allowed to fail, the failure would have left many thousands of people out of work and collecting various forms of government payments. Thus, involved parties must face a Hobson's Choice of which alternative to accept. The bad alternative, or the worse alternative?

Unfortunately, stepping in to save the day, as the government did in Chrysler's case, creates a Moral Hazard.

If competitors in a market know that government will toss out a life preserver if disaster strikes, then competitors will engage in excessively risky behavior.

But it takes two to tango. Borrowers willingly sign the loan agreements. In Barb's world, the borrowers who default are too stupid to know better than to obtain loans. Thus, they are not responsible for their defaults, according to this blog.

"Knowledge about unions is found in every bookstore and library and on the internet. Ehrenreich has no unique control of such basic information. Thus, what you claim to have learned from her book could have been gotten from many sources. Furthermore, some basic knowledge of unions should have come from attending school since public school teachers are all union members."

yes this is true. it's in every book store and all over the internet. But I have never herd the word "UNION" before reading her book. Unions were NEVER ONCED talked about in my school. Barbara never went in to detail about unions. But she made me aware of them. I was then inspired to go out and read up on them. Like it or not Barbara is doing good thing's in the world and she has inspired alot of people.

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"The situation fascinates me. Both the Post Office and the Expediter must get the document from the State Department. But the Post Office claims the process will take more than a month. The Expediter can get results from the same government agency in 24 hours. Yeah, I know how unions work."

I never said you did not know how unions work. But I compare my none union life to my union life to. In my none union life my medical would have been $50 a week out of a $400 pay check (just to cover my self.) This did not include vision or dental. And If I missed one day of work meant one of three things:
1. Not being able to pay a bill.
2. Not being able to eat for a day.
3. Not being able to pay the rent and becoming homeless.
I now pay $25 a week for great medical, dental, and vision. And I get a guarantied 40 hours a week. So I don't have to worry about not having food or home.

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"But being arrested is not the same as being charged with a crime. I doubt you were charged."
Sorry Chris but once again your wrong. I was charged but not convicted. Thanks to the pro-bono lawyer I found. (not a public defender) And the help of a low level security-garde who risked her own job to help me. (I did not see that then but I see it now! And I want to thank her if she's reading this.)

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"I see. Then your solution is to increase the price of everything. You especially want to see an increase in the prices of goods and services aimed at people who are not affluent."

No Chris, I don't WANT to see that. How ever if paying a little more for gum and dog food helps keep people from going hungry and homeless. Then yah, lets step up and do it.

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"You'd do well to demand a refund and buy a basic economics book"

So Chris, What's it like in the upper class? Is that silver platter getting polished? I ask because it's become apparent that you have not lived in poverty. You only see it at a safe distance from your wall street office with a window. (yes thats my theory.)

Justin wrote :
"So Chris, What's it like in the upper class? Is that silver platter getting polished "?

You mean silver spoon ?

Guys like Chris who "oppose" these basic issues with his tenacity
most likely was not a monied "sponsored" kid,but probably hailed from very humble beginnings. I'd peg him to be lower middle class, as these are the types who are so quick to pounce on the poor or less fortunate. He has all the answers and understands as he was once there.

People with real money don't act and behave like this jackass. Only those with a "bone to pick" spew back at reason like this. It is another form of denouncing your roots.

I am glad to see he was able to climb out of his past surroundings and educate himself to a point where he is knowledgable about many issues, but too bad he didn't learn any social graces. Might have been a latch key kid.

"No Chris, I don't WANT to see that. How ever if paying a little more for gum and dog food helps keep people from going hungry and homeless. Then yah, lets step up and do it."

Now you are concluding that our economy can meet your expectations of fairness simply through an increase in the price of two discretionary items -- gum and dog food.

How much of an increase in the prices of those two items is necessary to pay for the healthcare of 40 million people on top of giving millions of others the financial support to escape from homelessness and your unfounded belief of widespread food shortages?

Do you really think a tax on dog food and gum will cover those healthcare costs?

Larry I was thinking of the phrase "He has had every thing handed to him on a silver platter!" I don't know about any silver spoon.

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chris you said:
How much of an increase in the prices of those two items is necessary to pay for the healthcare of 40 million people on top of giving millions of others the financial support to escape from homelessness and your unfounded belief of widespread food shortages?

Is that what they call a run on sentence?
Okay Chris, don't be dumb! You know good and well that I'm not just talking about two lone items.
Also I never said there was a food shortage. Just that wal-mart does not pay there employees enough to buy food. because of the lack of funds the employees end up buying things like a small 99 cent taco (if they could even afford that.) and not a $3.00 salad. There is something wrong and the laws of economics that you speak of have failed people time and time again.

Andrea, spot-on! We all suffer when accountabilty diminishes, even when it might benefit us temporarily ... for one thing, it leads us into a fantasy world where anyone and everyone can "afford" a 2K sq. ft house in the burbs. What happened to the debt:income ratio we were given a short decade ago, that one shouldn't -- couldn't! -- borrow more than 2 and a half times their gross income? In how many real estate markets is that ratio anything other than laughable at that point, even w/sharp declines?

It's scary and confusing when all caution and common sense is thrown to the wind ... for good reason. The markets are all reflecting that right now .... and the only prob is that unlike the tech stock bust, people are left w/real estate, not money that was only on paper that most people had a decade or two to re-establish.

It is ludicrous to suggest that this will be a distant memory in 6 mos. Houses and condos aren't paper money ... I forsee massive numbers of people walking away from homes they never should've been taken out mortgages on in the first place.

"What happened to the debt:income ratio we were given a short decade ago, that one shouldn't -- couldn't! -- borrow more than 2 and a half times their gross income?"

Where do you get this stuff?

Credit limits are a function of interest rates. A decade ago long-term interest rates were higher than they are TODAY. Therefore, borrowing limits were LOWER.

Despite the increase in mortgage rates over the last year or so, rates are still far below the levels of the 1990s and still close to the historic lows of the early 1960s.

You asked:

"In how many real estate markets is that ratio anything other than laughable at that point, even w/sharp declines?"

Is it news to you that when people sell a house for a profit they often roll over the profit into the new house? That means the buyer might see very little change in his mortgage payment after acquiring a new house.

Your comments on the housing market suggest every purchaser is a first-time buyer closing the purchase with the minimum permissible downpayment.

yes I noticed. I have even seen a few contradicting statements from him just because he only takes an opposite stand to what Barbara says. Of-course you know what my theory is. Chris is really employed by some corporate entity and he's paid to dispute every thing Barbara says. Undermining the validity of her blog by doggedly and diligently demanding that every thing Barbara E. says is wrong and every thing he says is right. How else do you explain his presents here at this blog when he has not even read Nickel & Dimd. ( I know he did not read it because I once asked Chris and he admitted to not reading it.)

We live near a house that could be a case study for this crisis. Now granted you shouldn't judge a book by its cover ... but. I can all but guarantee this family was in over its head. They bought a new house, new construction, at near-height of the market. Six months later, they doubled the size of the thing w/an addition. Within months a for-sale sign was up ... asking what I know to be too much money. The contract w/that realtor expired, and another and another. Asking too much money ... by that time the market had peaked and was on its way down. For sale by owner for a few months, then another realtor, attempts to sell for almost two years ... finally they pulled up stakes and moved out last month. I saw the moving van ... this was a family in an "executive" house moving in the guise of what they were all along -- working people. No professional movers, just a U-Haul, and the house now has every appearance of having been abandoned.

This is a crisis rooted in sub-prime mortgages. By extension, first-time buyers w/very low down-payments or credit-worthiness are at issue. Of course these companies all thought they would foreclose on a bunch of losers and still pocket a year or two of payments ... what they didn't bargain on was the ripple effect. They thought they were just sticking it to a bunch of (literally) poor saps who dared to think they could have a piece of the American dream. But their greed got in the way of common sense ... just like mortgage-seekers didn't count on the little blips in life that make it difficult to keep up w/payments that are often more than 60% of one's gross income, mortgage lenders didn't count on cooling markets and mortgage holders' apparent readiness to let properties go, especially when so many other people in their neighborhoods are, too.

At last, the poor, middle class and rich are united in their common vice: status symbols at the expense of common sense. Not to sound too too smug, but those of us who realized this was too good to be true and stayed in our unimproved starter homes or apartments are breathing a big sigh of relief right now ... except for the states of our retirement funds. Oh well we'll just toil an extra 5 years to make up the diff so we can retire on our 1/3 acre, 3 bedroom raised ranch ... meanwhile you never know, those Countrywide execs might have to give up the Vail chalet or the St. Barts villa, but at least they'll still have the Manhattan pied a terre, Sun Valley lodge, Palm Beach house, and Bay Area getaway to call home.

Chris: '... Actually, the term -- bailout -- is ridiculous. Companies, such as Chrysler years ago, are not "bailed out." Chrysler received LOANS from the government when no commercial lender would take the risk of financing Chrysler....'

Right. I would like to go to Las Vegas on that basis.

By the way, I see where Countrywide just got two billion from Bank of America. Wonder where Bank of America got the money? Think it has anything to do with those many, many billions whistled up out of the void by the Fed and the ECB in the last several days?

Anyway, foreclosures are rising. When they reach the point where they inconvenience large banks and their congresspeople, I believe you will see the money pump started, threat of inflation or not. Especially if it occurs in an election year.

howard, if my figures are correct the population of canada is about 34 million. population of norway is about 5 million. population of united states is about 300 million. having observed the distibution and administration of medicaid for example i am not at all convinced that strong socialist policy could be duplicated on this larger scale. my reading of soviet economic failure suggests to me that a socialist model fails under its own weight. an apparent successful model on the micro level are the isreali communal settlements: kibbutzim. again however this is on a very small scale. if we attempted even a modest proposal such as universal dependent care which i understand to be a contetious issue in canada at this time, could the tax structure support even that modest of a propsition. when barbara suggest that we smash capitalism there does not appear to be any suggestion as to workable replacements. these are not at all simple questions.

"Chrysler received LOANS from the government when no commercial lender would take the risk of financing Chrysler....'"

Nice omission. The last part of my statement noted that Chrysler REPAID the loans.

You wrote:

"Right. I would like to go to Las Vegas on that basis."

On what basis? Given what you wrote, you are stating that you would like to withdraw money from your bank account, lose that money in Las Vegas, borrow an amount equal to your losses to put back in your bank account, and finally, repay your creditor.

That sounds excessive. Unlike Chrysler, you can just lose the money, throw your hands in the air and say "Oh well", and forget about the loss.

You observed:

"By the way, I see where Countrywide just got two billion from Bank of America. Wonder where Bank of America got the money?"

From its usual financing sources, which, despite your sneer, does not depend on any underhandedness.

You wrote:

"Think it has anything to do with those many, many billions whistled up out of the void by the Fed and the ECB in the last several days?"

No. I think the availability of the $2 billion reflects the substantial liquidity of Bank of America's balance sheet. For B of A, $2 billion is not much.

Meanwhile, as you should notice, banks have little exposure to the subprime loan market.

Anyway, foreclosures are rising. When they reach the point where they inconvenience large banks and their congresspeople, I believe you will see the money pump started, threat of inflation or not. Especially if it occurs in an election year.

"One of Bank of America Chairman and Chief Executive Kenneth D. Lewis's first acts after he became CEO in 2001 was to remove Bank of America from the subprime-mortgage business, which caters to borrowers with weak credit records.

Bank of America cited the risk and volatility of that business. At the time, the bank took a $1.25 billion charge, about half of it tied to subprime loans.

But Mr. Lewis has been eager to build scale in prime mortgage loans. Bank of America, the nation's largest retail bank, with 5,700 branches, hasn't been a major mortgage player, relative to its size.

It originated $95 billion in mortgages in the first half of 2007, less than half of Countrywide's $245.13 billion, according to Inside Mortgage Finance.

Bank of America, which reached its coast-to-coast size with a dazzling string of acquisitions, is also bumping up against a regulatory cap that bars any U.S. bank from an acquisition that would give it more than 10% of the nation's total bank deposits.

That leaves pursuing more mortgage customers as one of the bank's few potential routes to growth. Bank research shows that its customers with a mortgage tend to be credit-worthy and profitable, with an average of five accounts at the bank.

Bank of America in May rolled out a national "no-fee" mortgage program. Under the program, Bank of America doesn't charge borrowers for loan applications, title insurance, appraisals and flood certifications or require them to get private mortgage insurance -- part of a bid to secure customers' long-term business."

A prof of mine once said, "You can make as much money getting a dollar from a million poor people as you can from getting a million dollars froma rich man, and it's easier." I think that has been the philosophy behind the low-end consumerism represented by Wal-Mart.
The problem is that the poor have run out of even the small amount of money they have.
And the kind of credit extended to economically precarious people is just a disaster.
We are so unfair. Most people are really simple in their desires for a home, a family, good work, a modicum of security. Is that too much to ask in this life? But there is no way to live modestly and with honor. And that is too bad.

That there are illegal loans out on the market is relevant to the discussion, as are the legal but imprudent loans that also precipitated the current market situation.

Borrowers wanted spacious single-family homes, and lots of lenders saw an opportunity to make some quick money by providing them. Ordinarily, mortgages are slow, steady income for the investor, but selling off the note as many lenders did is a way to make the money you can and rely on volume to create the wealth, as I understand the situation.

Both practices show a lack of principle. The math works, but finance is a hybrid of calculus and psychology, and unscrupulous lenders whether thoroughly criminal or merely questionable exploit the psychology to the benefit of the math.

The Three Card Monty guys do the same thing. They aren't breaking laws because Gambling Commission ruled that Three Card Monty isn't gambling, despite the betting that the audience does. The man with the cards knows that the Queen will never be where the audience member says it is, unless the audience member is a pretty woman with a charming smile. Likely, she is also a shill.

The sub-prime market relied on a basic premise of logic here in the States: the future will always be better. The adjustable rate mortgage looks appealing because of its initial low rates, to be sure, but it also plays on our beliefs that the rate can't possibly get to a point where it wouldn't be payable. That would be a bleak future, and we don't believe in those. Many borrowers relied on a future refinance to bring an ARM under control or to pay down a healthy chunk of the prinicpal, only to find that refinancing wouldn't be an option because the rise in the value of the house didn't create enough equity. That fact might enter into the head of a borrower planning for the future, but would not receive the weight that more optimistic thoughts would carry.

There are people who will fall into these traps without sound advice -- or indeed despite sound advice -- but the ethical standards of lending demand that this sound advice be voiced. I have the feeling that in an effort to score commissions, some mortgage salespeople failed to say the words that some people needed to hear.

is it wise to "smash capitalism" whether we understand the phrase or not, in order to prevent a small minority of the population from entering into risky and foolish financial transactions. lets keep some perspective here.

Well there's a novel concept, roger ... delayed gratification. How come the poor/credit-unworthy are the only ones who are supposed to abide by that concept? I don't have a prob acknowledging that people were dumb to get in over their heads ... why can't you admit that the lenders were equally stupid, and should share the blame? I don't understand you champions of capitalists ... your ignorance of the double standards in this system is astounding.

Andrea, your comments reveal that you know virtually nothing about finance and the workings of the mortgage market.

It's unfortunate that you maintain such high confidence in your completely mistaken views.

You wrote:

"That there are illegal loans out on the market is relevant to the discussion..."

Why?

Criminal activity is the province of law enforcement. You, however, attemp to create a hazy equivalence between criminals, the people they dupe and people who simply overextend themselves.

You also conveniently forget that lots of people endure foreclosures EVERY YEAR. The latest headlines scream that the CURRENT RATE of foreclosure is running 93% above the year-earlier rate.

However, since you do not understand math, you should know that this claim means very little because it calculates the foreclosure rate over a very short period of time. Think of reading the thermometer at the hottest point of the day, then comparing that number with the temperature at the lowest point.

You wrote:

"Borrowers wanted spacious single-family homes, and lots of lenders saw an opportunity to make some quick money by providing them."

The preceding is your first display of mortgage nonsense. Almost ALL issuers of mortgages charge mortgage origination fees and extract other charges from borrowers. This has been the case since the dawn of mortgages.

As I noted in a previous post, Bank of America is dropping most of the usual and customary charges to attract more mortgage business. Meanwhile, no one is forced to borrow from a lender demanding high fees. But some people have lousy credit, which means if they want a mortgage, they must pay a risk premium to the lender. That's life!

You wrote:

"Ordinarily, mortgages are slow, steady income for the investor..."

You have no idea what you're talking about. There are many different types of mortgage lenders and a couple of layers of companies that operate between the lender and the borrower. There is also a secondary market for mortgages and there are two federal agencies that BUY mortgages from originators or in the secondary market.

First, you should learn about GNMA -- Ginne Mae, or Government National Mortgage Association -- and FNMA -- Fannie Mae, or Federal National Mortgage Association.

You wrote:

"...but selling off the note as many lenders did is a way to make the money you can and rely on volume to create the wealth, as I understand the situation."

You obviously understand nothing, but you believe the lunacy because it suits you to believe there is a conspiracy against stupid people at work.

Mortgage companies, banks, savings & loans, credit unions, credit-card companies, brokerage firms and others originate mortgages. Mortgage bankers originate mortgages and sell them into the secondary market -- that's a little like selling stock in the stock market. Mortgage bankers do not retain mortgages. They originate them, collect the origination fees and sell them to the organizations that hold mortgages.

Holders of mortgages include banks, thrifts, GNMA, FNMA, mortgage investment funds and others. If there were no mortgages for sale in the secondary market, some of these mortgage-buying organizations would not exist.

You wrote:

"Both practices show a lack of principle."

Wrong. Your assessment shows your total naivete.

You wrote:

"The math works, but finance is a hybrid of calculus and psychology, and unscrupulous lenders whether thoroughly criminal or merely questionable exploit the psychology to the benefit of the math."

Really? A hybrid of calculus, psychology and unscrupulous lenders! Wow. Who are these guys? What are the identifying characteristics of these clever and conniving money-lenders?

You wrote:

"The Three Card Monty guys do the same thing."

Really? So ALL people in the mortgage business rob homebuyers of every cent put toward the purchase of a home. Wow. How did you get this smart?

Three Card Monte is not a game of chance because chance does not determine the outcome as it does in black-jack or rolling dice. Three Card Monte is a rigged game, which means the bettor cannot win. If it were a legitimate game of chance, you would see it played in casinos. However, the only place you will see a Three Card Monte game in a casino is when a magician performs it in a floor show. I gather you have been duped by Three Card Monte scammers.

You wrote:

"The sub-prime market relied on a basic premise of logic here in the States: the future will always be better."

History has proven that this view is valid.

You wrote:

"The adjustable rate mortgage looks appealing because of its initial low rates, to be sure, but it also plays on our beliefs that the rate can't possibly get to a point where it wouldn't be payable."

People and businesses take financial risks every day. Risk-taking is part of everything we do. You, however, are finally discovering that there are real risks involved when a person bets hiimself against the future. Sometimes we humans make bad bets. Big deal.

You wrote:

"That would be a bleak future, and we don't believe in those."

You obviously have no idea what people believe in. Some segments of the investment world profit when things go bad for others. Those are the guys who kick in the money when others are afraid to step in. Others engage in "short-selling" stocks. They make money when stock prices drop. All normal everyday stuff -- which has not entered your consiousness till now.

You wrote:

"Many borrowers relied on a future refinance to bring an ARM under control or to pay down a healthy chunk of the prinicpal, only to find that refinancing wouldn't be an option because the rise in the value of the house didn't create enough equity.

Wrong. Refinancing is NOT dependent on a rise in value of the property.

You wrote:

"That fact might enter into the head of a borrower planning for the future, but would not receive the weight that more optimistic thoughts would carry."

Any thought MIGHT enter the head of a borrower. Borrowers can ask lenders for any arrangement that enters their heads. The lender might refuse, or the lender might agree.

You wrote:

"There are people who will fall into these traps without sound advice -- or indeed despite sound advice -- but the ethical standards of lending demand that this sound advice be voiced."

In other words, you're saying how unfortunate it is that stupid people are allowed to buy homes. You want someone -- the government -- to stop them from their folly. Nice.

You wrote:

"I have the feeling that in an effort to score commissions, some mortgage salespeople failed to say the words that some people needed to hear."

It must be news to you that people who earn commission-based pay are especially eager to close sales. There is a phrase you should embrace: Caveat Emptor.

Because your view of the world is so narrow, you seem unable to grasp that people have strong desires they want to satisfy, even if it means stretching the truth to a mortgage lender. It also means the mortgage broker might not challenge the excessiveness of their claims. That's life.

the vast majority of the lenders were above the board. the minority of the lenders referred to here were not equally stupid but in fact expolitive and seductive and these should be punished by law. i readily admit that the lenders should share in the blame. barbara however seems to imply here that the answer to preventing these folks from being abused again is to dispatch the whole concept of capitalism. i disagree. we regulate where it is necessary and retain sanctity of law. as for double standards i would say that it certainly exists and is an unfortunate product capitalism however i am not convinced that the entire capitalist system need be thrown out because a minority fail to compete well within the system.

i read another blog in which the author advocates that no one should be allowed to earn more that $30,000 per year (joe bageant). is this the type of action, even if it were possible, that you would seek in order to prevent these apparent double standards. the solution must be workable.

Freddie Mac was chartered to provide stability, liquidity and affordability to the nation’s residential mortgage markets – and this includes the subprime market.

Over the past decade, the subprime market has experienced a profound transformation, in size, investor interest and mortgage type. Using the tools of securitization and automated systems pioneered in the prime mortgage market, Wall Street and the global capital markets transformed the subprime market from a relatively small portfolio-based market that specialized in debt-consolidation refinances for credit impaired borrowers into a major market segment.

Representing about 15 percent of all single-family debt outstanding, today’s subprime market provides home purchase mortgages as well as refinances to a much wider set of borrowers, including those with limited equity in their homes.

there is a woman in our office who is part of the janatorial team. she is of hispanic decent and has a couple of great kids. we practice speaking english and her english is improving. i earn three times her hourly wage. i do not have to delay my gratification when i go out to eat and make significant purchases including a home. we are a human services agency and we see that there is need here and have helped her when her car broke down and when the kids needed to get on medicaid. there is irrefutably an income disparity. i have many privileges at this point in my life which she will never afford or enjoy in her lifetime. how would you solve this circumstance. this appears to be what you are referring to when you insist that i am ignorant of what you refer to as a double standard.

I sat back and watched all of these real estate flippers, speculators, and others who couldn't afford to speculate on real estate brag about their low financing rates and critisize me for paying a higher "fixed rate" loan. Now Barbara says that I should now pay more taxes so that these speculators, some of who made fortunes flipping houses, can be bailed out because these loans went bad. I am all for going after the bad guy, but in this case, it is the house purchasers, not the lenders.

Chris, the only way that Three-Card Monte would be played in a casino is if it had a house edge AND the gaming commission approved it. The trouble with getting it approved would be assuring the commission that it was a fair game. You could do this by using s shuffle machine to shuffle the three cards, then people could bet on whether the red queen would come up first, second, or third. People could place their bet on a circle marked "1", "2", or "3" before the cards were exposed.

Three Card Monte has a huge house edge. It's a wonder that people need to cheat at it. They must just be greedy. If my recollection is correct, you are paid even money if you find the red queen among the three cards. If you were being paid proper odds, presuming a random choice due to an untrackable shuffle, you would get 2:1 on your bet, not the even money that is paid.

I'd bank a Three Card Monte game all day if I could, given appropriate permissions, because it's such a bad bet even when run fairly!

Will, you miss the point: we're bailing out the banks, not the overextended buyers. The flippers aren't gonna get their foreclosed properties back. I am in 100% agreement with you that it was irrational exuberance on both sides ... but how are we bailing out the purchasers? They'll now have to re-build their credit in a much less friendly borrowing climate, w/much weaker bankruptcy protections. Make no mistake, We're bailing out the lenders and the lenders only ... and you can be very sure that when the dust settles, they will still realize a profit.

Maybe you read the news upside down yesterday. Bank of America is investing $2 billion in Countrywide.

You wrote:

"...not the overextended buyers."

You have no idea if speculators are rescuing "overextended buyers." But, in fact, if there is any way for a new set of financiers to help those "overextended buyers", they will.

You wrote:

"The flippers aren't gonna get their foreclosed properties back."

Do you know what a "flipper" does? He buys property in the pre-constuction phase AT A DISCOUNT from the expected market price of the completed project.

Flippers don't hold property. They sell it as soon as possible after it has received a certificate of occupancy. The point of flipping is to make a relatively small profit on a large leveraged transaction that generally requires an investment time horizon of six to 12 months.

This is nothing less than raw real estate speculation. Why do you care if a speculator loses some money on a trade? Speculators are risk takers. If they don't know what they are doing, that's their problem.

You wrote:

"I am in 100% agreement with you that it was irrational exuberance on both sides..."

There's nothing irrational about an investment strategy that has proven itself successful many many times over the years.

You wrote:

"...but how are we bailing out the purchasers?"

Again, you have no idea of the deals owners have made or will make to keep their homes. But some will lose their homes in foreclosure. What's new about this? Nothing.

You wrote:

"They'll now have to re-build their credit in a much less friendly borrowing climate, w/much weaker bankruptcy protections."

First, you have no idea if anyone has seen their credit rating decline. But so what if individual credit ratings of some people have dropped. They are always changing.

When you say "weaker bankruptcy protections", what the heck do you mean?

I have a suspicion you think the phrase has something to do with keeping the lender from foreclosing.

During the Savings & Loan Crisis of the late 1980s and early 1990s, it became apparent the best game in town was bankruptcy. People in Colorado, Texas and Florida developed an outstanding game.

If the net value of their homes had disappeared leaving them with "negative equity", they found they could still buy another house at a deflated price, default on the mortgage of their expensive previous house, declare bankruptcy and eliminate their debt while maintaining their life styles in the new, bargain-priced house.

In Colorado, Texas and Florida, creditors were not empowered to foreclose on the homes of people who had declared bankruptcy. Thus homebuyers won big!

You wrote:

"Make no mistake, We're bailing out the lenders and the lenders only..."

What do you mean by "we"? Did you write a check to the "Save Countrywide Mortgage Foundation"?

None of the troubled lenders are receiving a dime of free money. The bold investors are getting a lot of skin for every dollar they invest.

You wrote:

"...and you can be very sure that when the dust settles, they will still realize a profit."

That is unquestionably the goal. But there is no guarantee they will reach that goal.

It's astounding that the normal functioning of a market-driven capitalistic economy disturbs you so.

"Chris, the only way that Three-Card Monte would be played in a casino is if it had a house edge AND the gaming commission approved it."

The only way any game receives the approval of various gaming boards is if it is truly a game of chance, like dice, or truly a game that employs some skill, like poker.

Three Card Monte is neither. It is, as I stated, a scam. The "player" cannot win. Ever. The operators of the game trick the "player."

When Three Card Monte scams were common sights on New York City sidewalks, I took great pleasure in telling the gullible tourists they were getting robbed by the operators. It was disturbing to hear many of them tell me I was wrong. But a while later they realized I was right.

Just to clarify ... I'm aware that "creative financing," esp. interest-only mortgages, is alive and well outside of the U.S. However in those cases (Switzerland being one example) it is the rule rather than the exception ... real estate inflation is so acute, no one can really "afford" real estate. Is this where we're headed?

There is a particular measure that I believe is needed to help the poor, but that does not seem to be on any politician's agenda as far as I can tell. Although it probably will not solve all problems, it would be a good place to start. It certainly ought to have higher priority than further tax cuts for the rich such as repealing the estate tax.

Specifically, the dependency exemption needs to be converted from a tax deduction into a 100%-refundable tax credit, and the child tax credit needs to be made 100%-refundable. Indeed, all tax breaks for children and dependents need to be made 100% refundable tax credits. The standard deduction might also be converted into a 100%-refundable tax credit. This should be done at both federal and state levels.

That way, even those who earn too little income to owe any income tax would still get the full benefits of these tax breaks. Since these middle class tax breaks already exist, the only cost would be the incremental cost of extending them to the lowest incomes. Such merely incremental costs ought to be affordable. There should also be less risk of unintended consequences, since we already have some idea how these tax-breaks function in real life.

Unlike conventional means-tested welfare, child and dependent refundable tax credits would help the working poor, as well as those not working. Additional earned income would not mean a dollar for dollar reduction in benefits. The refundable tax credits would offset the Social Security tax, as well as the income tax. This is extremely important to the working poor, since most low-income workers owe more Social Security tax than income tax.

More generally, the size of child and dependent refundable tax credits would depend exclusively on the number of children and dependents one has a right to claim. One's income and/or assets would be completely irrelevant, as would one's marital status. Therefore, unlike conventional means-tested welfare, although they would be available to those not working, they would not punish work, savings, or marriage.

In other words, the incentives for both the poor and the middle class would be very much the same. Since there would be no means-testing, extending existing middle-class tax breaks to the poor ought to avoid the most perverse incentives of means-tested welfare, which tends to punish work, savings, and/or marriage. This is the main advantage to this approach for a safety net for the poor.

Child and dependent refundable tax credits could be an alternative or a supplement to raising the minimum wage. Unlike a higher minimum wage, employers would not bear the entire cost. Therefore, there should not be the problem of employers refusing to hire the so-called "low-skilled" people, which is the main reason given for opposing a higher minimum wage.

Yet low wage employees would still get more take home pay, which is the main purpose of a higher minimum wage. Since there are limits to raising the minimum wage, given the risk of employers refusing to hire the so-called "low-skilled" workers, supplementing low-wages with negative income taxes will clearly still be necessary, even with a higher minimum wage.

I should mention that low-wage jobs are not necessarily as unskilled as we often seem to think. Specifically, I have noticed that we often seem to forget that dealing with customers is a skill. Even many low-wage jobs involve dealing with customers. When one considers that some customers will be nasty, and that dissatisfied customers may stop doing business with the company, and possibly spread the word to others, it seems to me to be awfully risky to take for granted the skill of dealing with customers.

Moreover, skill deficiencies here cannot always easily be remedied by more education and training. Most standard education and job training do practically nothing about deficiencies in social intelligence. This is especially a problem for high-functioning autistics. They are often intelligent enough to get advanced degrees, but lack the social intelligence to do most jobs requiring those advanced degrees. Even worse, since their chief skill deficiencies are things that most people seem to learn without being taught, they are often completely unaware of what they do not know.

To counter tendencies to blame the victim, it is time to insist that, just as accused criminals are innocent until proven guilty in the eyes of the civil law, poor people ought to be presumed to be deserving, until proven otherwise. In addition, even poor people who can be proven to be at fault still ought to have any rights that a convicted criminal would have. This is especially true of rights that even convicted cold-blooded murderers have.

I find it impossible to see how welfare for the poor could be an unaffordable tax burden as long as we are providing for convicted murderers at taxpayer expense, no questions asked. Specifically, if convicted murderers are provided food and shelter at taxpayer expense in their jail cells, how can one object to providing taxpayer support to others in need? This includes illegal immigrants as well. Surely, cold-blooded murder is a much greater evil than laziness or immigrating illegally.

Similarly, as long as there are questions about the appropriateness of executing convicted murderers, I find it impossible to see how it could be just to have capital punishment for laziness or illegal immigration, especially if guilt has not been proven. Deliberately setting limits on access to food or other basic necessities of life is the practical equivalent of capital punishment. Even if capital punishment is appropriate for cold-blooded murder, it would still seem to be unjust to have it for laziness or illegal immigration.

A genuine lack of sufficient resources to provide for the poor or illegal immigrants would, by definition, necessarily mean insufficient resources to provide for convicted murderers as well. This is not only a question of fairness. If jailed criminals have more right to the basic necessities of life than the poor, there is an incentive for those in need to deliberately commit crimes specifically in order to actively force the taxpayers to pay the costs of supporting them in jail. (See Barbara Ehrenreich's "Pension or Penitentiary?" post of October 16, 2006.)

This means that in order to really abolish the welfare state, it will be absolutely necessary to have capital punishment for practically all crimes, not just the most serious crimes. There is simply no other way that those who deliberately commit crimes in order to actively force the taxpayers to pay the costs of supporting them in jail, as described above, can be stopped. Indeed, this is probably why most crimes had capital punishment for most of human history before 1900. In those days, society simply could not afford the costs of jailing someone for a long time, especially since doing so would encourage more people to commit crimes.

But the thing is that immigrants are free not to come here, and the poor are free to look for employment. Inmates are kept in prison even if they don't want to be there, and that prevents them from getting a job. And since it is the government's idea to keep them in jail, of course the government is supporting them. But it is not true that most criminals before 1900 were executed. It depends on the time period and on the crime, and perhaps on the leniency of the judges. For murder, yes, it was pretty much taken for granted that whoever kills has no right to live. And yes, I am aware that harsh penalties including death for lesser crimes did exist and some criminals did get such penalties. And some lesser penalties, such as whipping and branding, were not exactly lenient. If they existed today, that would prevent poor criminals from trying to go to jail. That might be a solution. And minor amputation, too. Maybe a hand is too much, cutting a finger or toe at each conviction, for example, would deter most criminals, even if at first they don't care that much about a finger or two.

someone truly foolish, benighted and oblivious said this: This means that in order to really abolish the welfare state, it will be absolutely necessary to have capital punishment for practically all crimes, not just the most serious crimes. There is simply no other way that those who deliberately commit crimes in order to actively force the taxpayers to pay the costs of supporting them in jail, as described above, can be stopped.

i cant imagine where you get this stuff. the most egregious capital punishment cases in china are performed for the purpose of harvesting organs which are then sold to patients in the west. i view this practice as inexplicably vile and despicable. even the chinese would not stoop to executing people for the purpose of preventing them from being supported by the state. how a sane and reasonable person could conjure up such moonbattery is well beyond my capacity to process. you must be mad.

......a minor amputation? in africa they perform female circumcision. would your solution be akin to this procedure. or is the surgical removal of the tongue more along what you had in mind. it is beyond belief and conscience what you have proposed. perhaps you are correct that they would not care about a finger or two. maybe the state needs to go with surgical removal of a pound or two of flesh. have you no shame at all.

You have to learn to skip over certain posters if you spend much time on this forum.

Btw ... as heartwarming as your tale of being charitable toward the cheerful and virtuous help was, those aren't really the kinds of double standards I was talking about.

I'm talking about, in a larger sense, valuing single- and simple-minded greed as a virtue when it's practiced by capitalists ... heck, conservatives like to credit it for everything from "good" feminism to human rights. But when the same urge for instant gratification or living beyond one's means is displayed by the less-fortunate/connected, it's a sign of immaturity and audacity. Don't forget, you are living beyond YOUR personal means if your fortunes are tied up w/the lower-paid contributions of others. And don't get all in bluster accusing me of promoting socialism or communism, I'm just relating the facts, not proposing that we throw the baby out w/the bathwater.

In other words, it's desirable for one to conduct business with the goal of paying people as little as possible under law in, say, a fast-food restaurant. But if that same person turns around after a long shift and buys a value meal instead of going home to eat bulk-purchased beans that have been stewing all day in a second-hand-bought slow cooker, certain people on this forum will be salivating at the chance to call them fat, lazy, stupid, only have themselves to blame when their rent is late ... etc. Yet will defend to their deaths the virtues of their employers .... in other words, some humans are just worth more than others. Get it?

we have had the discussion in our office as to what food stamp recipients should be allowed to purchase with some going so far as to say that there should be a separate section in the grocery store set aside for food stamps folks so that they would be restricted to the purchase of nutritious bulk food. its a silly arguement.

i see the central strength of capitalism as the profit incentive as practiced by private enterprise. the development of ibuprophen for example was accomplished by private industry seeking profits. yes there have been govt tax breaks to corportions and yes corporations often use people as an expendable resource which is harmful to familes, but the risk was taken by private industry and the result has benefit countless people around the world. this is not to attenuate any abuse by corporations upon the population. we should retain the beneficial aspects of capitalism and regulate that which needs to be under kept under control. what ignorant people salivate over is irrelevant to the central issue of which system of economics lifts the most boats and saves those that begin to go under.

as for hearwarming tales i cite this woman as an example of folks who come to a competitive environment lacking skills to compete. i believe that the safety net should be stenghtened to catch just such folk when they fail to negotiate a competitive environment. we have interviewed thousands of people like her and know what the obstacles are. if you are under the impression that we expect some manner of ingratiating response from her then you would be incorrect.

Chris, three-card monte is a scam, but it can be run as a normal game, as I outlined. Just pay less than 2:1 for finding the red queen. The reason that people will accept a much lower than fair payoff if they happen to be right is because they have the illusion that they can track the queen and win.

I think that it was Ricky Jay, who is a magician, but who might be more familiar to people for his role in the first season of "Deadwood" as Eddie the craps dealer, who noted that the best way to play Three Card Monte (if you really must, under severe duress) is to not attempt to track the queen, and just pick a card at random. You can't tell whether the queen is on top of another card or below it if the "Monte" shuffler is any good.

A game that died out fast in the casinos is "War". Yes, it's that game that you played as a child where the high card won. That bet is paid at even money. To get an edge for the house, any time the dealer and player got cards of equal rank, the player had the option of surrendering half the bet or posting another equal bet and having the dealer deal himself and the player another card. If the player's card is higher, the player is paid for the second bet and gets nothing for the first bet. In the case of a tie, you had to be two units to have a chance to win one unit, or accept a certain loss of half a unit. It's not a bad game for the player.